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Cracks in Traditional Banking: Is Decentralised Finance the answer?

Global Financial System in Crises 

As the world gears up for another wave of economic turmoil, many people are understandably concerned about the security of their hard-earned savings. Recent events suggest that the global financial system is once again teetering on the brink of collapse, just like it did back in 2008. The good news is that there is an alternative to traditional banking that offers a safer, more secure way to store and grow your wealth. More on that later.

Let's start by looking at what happened in 2008. The global financial crisis was triggered by the collapse of Lehman Brothers, a major US investment bank. The crisis then spread to other banks and financial institutions around the world, causing a credit crunch and a wave of bankruptcies. The result was a deep and prolonged recession that took years to recover from.

One of the reasons why the crisis happened was because of instability that had been building traditional finance. Banks had become too big, too interconnected, and too heavily leveraged. When things started to go wrong, they were unable to absorb the losses, and the whole system came crashing down. To prevent a total collapse of the financial system, central banks stepped in and bailed out the banks with taxpayers' money. This led to further inflation, as the value of the currency was eroded.

Fast forward to today, and we are once again facing a potential crisis. The US government is facing a debt ceiling crisis, which means it could run out of cash if the debt limit is not raised. This could have serious consequences for the global financial system, as the US dollar is the world's reserve currency. If the dollar were to lose its value, it could trigger a chain reaction that would affect the entire global economy.

What is to be done? 

So, what can we do to protect ourselves from this kind of scenario? Managing your funds with decentralised finance (DeFi) platforms can be an innovative way to manage your money. It allows you to store your money in a decentralised network, rather than a centralised bank. This means that your money is not controlled by any single entity and you are in full control of 100% of your funds, at all times.

It's common practice for banks to use a significant portion of their customers' deposits to make loans, as it's a profitable way to generate income. Banks have lending criteria in place to assess the risk of borrowers and determine interest rates, which ultimately affect the amount of interest the bank can earn on those loans. However, this practice also exposes customers' deposits to the risk of default by borrowers, which can have negative consequences for the bank and its customers. In contrast, DeFi platforms allow users to lend their assets directly to borrowers, typically through smart contracts that are secured by blockchain technology. This allows for greater control and transparency over lending and potentially reduces the risk of default as borrowers are also required to provide collateral upfront.

In addition to lending and borrowing, DeFi can be much faster and more efficient, as transactions can be processed instantly and without the need for intermediaries. At all times there is transparency over each transaction, as all transactions are recorded on a public ledger that can be audited by anyone. Another benefit of DeFi is its ability to offer greater financial privacy. Traditional banks are required by law to collect and store a lot of personal information about their customers, which can be vulnerable to hacking and identity theft. In contrast, DeFi transactions are often pseudonymous, meaning that users can transact without revealing their personal information.

Finally, DeFi offers greater control over one's own money. In the traditional banking system, banks have the power to freeze or seize funds for a variety of reasons, such as suspected criminal activity or government orders. With DeFi, users have complete control over their funds and can transact without fear of censorship or interference.


Overall, DeFi offers a range of tangible benefits over the traditional banking system. While it may not be a perfect solution, it represents a powerful alternative that is gaining traction among a growing number of individuals and institutions. As the global financial system continues to face challenges and show vulnerability, it is important to consider the potential advantages of decentralised finance as a way to protect and grow one's wealth.

SwissBorg’s Solution

At SwissBorg, we believe in the future of DeFi, but we know it cannot happen overnight. Through a hybrid CeFi / DeFi model, we can give our users access to the world of DeFi (through products like SwissBorg Earn) whilst providing a level of security and support that a centralised entity can bring.

Curious to learn more?

We encourage you to discover our SwissBorg Earn and Thematics products as a route to easily invest and access aspects of the DeFi world but in a simple and secure framework.

You can also learn more about our Proof of Liabilities product which was built to provide transparency over your funds, so you can rest well assured that your funds are not being leveraged or misused by the company.

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